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Raw wool imports were well down in 2016, led by a sharp drop in imports by China (the major
wool processing country) despite strong demand from Europe. Most recent monthly data
suggest that China’s purchases have started to recover.
As shown in the chart below, raw wool imports from the major wool processing countries and
regions in total fell by 7% in 2016 to just 588 mkg, the lowest level in over ten years. The decline
was largely due to an 11% drop in imports by China. Note that the total imports by China, at 372
mkg, is above the low level seen in 2011. It also continues the annual up and down in imports by
China since 2012, with a drop in 2016 due to mills in China cutting purchases to bring excess
stocks under control. China’s imports from the US declined, by 35%.
While China’s raw wool imports dropped sharply in 2016, purchases by the European countries
(mainly Italy, the Czech Republic, Germany, the United Kingdom and Bulgaria) lifted by 9% in
2016. Of this, imports by the Czech Republic increased by 11% and imports by Germany rose by
23%. Italy’s imports were flat. In total, imports by European countries in 2016 were the highest
since 2011, helped by strong demand for Merino wool.
March 2017 >>>
China’s raw wool purchases down in 2016, starting to recover?
Economic indicators point to improvement
Wool exports from New Zealand and Uruguay collapse
Merino wool prices leap, Crossbred wool prices collapse
US lamb prices stable as Australia and NZ prices rise
journal wool A Regular Insight into the U.S. and Global Wool Market
Retail Demand and Economic Conditions
Economic growth in some of the major wool
consuming countries have improved in the past 3
months, which has bolstered world share markets
and pushed up commodity prices. It has also helped
maintain consumer confidence at high levels in the
European Union (EU) and Japan. Furthermore, in
February consumer confidence in the US hit the
highest levels since July 2001. This is encouraging for
improved retail sales in all countries, notably the US,
which should help wool prices.
The chart below shows the trends in the leading
economic indicators in China and in the major
advanced economies compared with the benchmark
Australian Eastern Market Indicator (EMI). The
upturn in the leading indicators in both China and the
advanced economies can be seen, as can the strong
rise in the EMI in recent months.
Wool Textile Industry Conditions
Trends, Drivers and Prospects
Raw wool purchases by India
declined in 2016, by 5%, to 35
mkg which is the lowest level in
over a decade. India’s purchases
from the US also, declined, by
22%.
2016 was a difficult year for raw
wool trade even though prices
for Merino wool performed
relatively well. Encouragingly,
there are clear signs that China’s
raw wool purchases started to
pick up in the last two months of
2016 and in January 2017.
Page 1
Trends, Drivers and Prospects
ASI
Economic Leading IndicatorsTrends in Key Economic Indicators versus the Australian Eastern Market
Indicator in US$
400
600
800
1000
1200
1400
1600
92
94
96
98
100
102
104
CLI - China
CLI - Advanced wool consuming countries
Eastern Market Indicator
EMI UScents/kg cleanindex
Source: OECD, AWEX
* Amplitude adjusted form of the Composite Leading Indicator (CLI) for OECD countries and for China.
CLI to December 2016 pushed out 8 months. Wool prices till w/e 3rd March 2017
Wool Imports by Major Processing Countries(Calendar Year to December)
0
50
100
150
200
250
300
350
400
450
500
550
600
650
700
750
China India Europe Other Total
mkg
gre
asy e
qu
iv.
2010 2011 2012 2013
2014 2015 2016
+9%
-11%
-5%
-7%
Note: From the five major exporting countries (Australia, New Zealand, Argentina, Uruguay and South Africa
Source: Australian Bureau of Statistics, FLA, SUL, Capewools, NZ Meat and Wool
-7%
2017 has started spectacularly for Merino
wool prices after an extended 18-month
period of unusually stable prices. China is
ramping up its purchases of fine wool which
is the main, but not the only driver, for the
increase. But it is shunning wool of 26
microns and broader sourced from New
Zealand and Uruguay, resulting in a collapse
in prices for broad wool.
The question is whether this situation will
continue in coming months? Signs on the
economic front are relatively positive with
leading indicators pointing to a continued
improvement in China and in the advanced
economies. This, coupled with strong
consumer confidence in the US, Europe and
Japan, should provide a good foundation for
retail orders in preparation for the 2017
Fall/Winter. This could in turn sustain the
recent increase in demand for Merino wool
and, hopefully, flow through to demand for
Crossbred wool.
Merino prices might be overheating and
could be due for a correction, although the
upward cycle could last until mid-year as
supplies will be constrained. On the other
hand, Crossbred prices could remain low
before turning up mid-year.
ABARES
Wool Outlook Wool and Fiber Prices
Fine Merino wool prices have surged in the opening months of 2017 as increased demand has been met
by seasonally lower supplies. In contrast, the slump in prices for broader wool continues.
Merino wool prices leapt since December, notably at fine end. As a result, in the first week of March the
Australian Eastern Market Indicator in A$ terms hit the highest level in almost 3 decades. In US$ terms,
superfine Merino wool prices (e.g. 18 micron wool) have jumped by around 15% since December.
Demand for this wool type has increased as supplies have slipped back. Meanwhile, prices for broader
Merino wool (e.g. 21 micron wool) have lifted by around 4%.
At same time, prices for broad wool (26 micron and broader) from New Zealand, Uruguay and the
United Kingdom have slumped in recent months. Since December, the NZ Broad Crossbred (33 to 35
micron) price has dropped by 12% in US$ and the fine Crossbred (25 to 32 micron) price has fallen
7%. The British Wool Marketing Board’s
Market Indicator (which is for very broad
wool used in carpets) has declined by
11% since December. These declines for
this broad wool tallies with the decline in
raw wool exports from NZ and Uruguay.
The chart here shows the recent
divergent trends in wool prices.
As a result of the surge in fine Merino
wool prices and the decline in Crossbred
wool prices, the price differential for
each micron against the benchmark 21
micron price has widened (see chart on
page 3).
March 2017 >>>
Trends, Drivers and Prospects
Trends, Drivers and Prospects
countries mainly produce Merino wool which appears to have seen solid demand throughout 2016. US wool exports also declined by a relatively moderate
3%. Argentina’s wool exports rose sharply, by 18%, in 2016. This increase was almost entirely due to a leap in exports to Europe as mills in that region
sought lower priced Merino wool.
The chart shows the trends in the annual change in wool exports for each country on a rolling 12-month basis.
Page 2
Wool Production and Supply
New Zealand and Uruguay bore the brunt of the decline in raw wool purchases by the
major processing countries in 2016 as demand for wool broader than 26 microns
dropped sharply. Demand for Merino wool was relatively well maintained, helping
exports from Australia, South Africa and Argentina. US wool exports eased a little.
Wool exports from New Zealand and Uruguay collapsed in 2016, dropping by 17% and
22% respectively. Exports from both countries in 2016 were the lowest in 20 years or
more. The main, but by no means the only, driver of this decline was a massive drop in
exports to China. New Zealand’s exports to China fell by 31% in 2016 and Uruguay’s
exports to China dropped by 44%. It appears that China’s mills cut back drastically on
their purchases of the broad, non-Merino wool that it sources from both countries. This
could be due to a combination of excess stocks of wool and wool products made with
this wool and competition from synthetic fibers, notably acrylic.
By comparison, exports by Australia and South Africa fell more moderately. Australia’s
exports slid back by 3% in 2016, while South Africa’s exports eased by 2%. Both
Merino Wool Prices Surge; Broad Wool Prices Dive
0
100
200
300
400
500
600
700
Australia 19um
South Africa 21um
USc/lb
Source: AWEX, Capewools, BWMB, NZ Wool Services
Prices to end February 2017
For Australia price is for 19 micron wool, for South Africa price is for 22 micron wool. For New Zealand, it is for both fine (25-32
micron) and broad (33-38 micron) crossbred wool. For the UK, it is the British Wool Marketing Board Indicator.
0
50
100
150
200
250
300
NZ Fine Xbred
United Kingdom - Broad
NZ Broad Xbred
USc/lb
Wool Exports by USA, NZ and Uruguay Drop,
Exports by Australia, Sth Africa and Argentina Lift12 month rolling aggregate
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
Australia
Argentina
South Africa
% change y-o-y
Source: Australian Bureau of Statistics, FLA, SUL, Capewools, NZ Meat and Wool, USDA
Data to January 2017
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
New Zealand
Uruguay
USA
% change y-o-y
These statistics and charts present a snap-shot of the current situation in the global wool industry. The two charts in this edition show consumer confidence
in the major wool consuming countries and the price differences for superfine, fine and broad wool compared with 21 micron wool.
wool statistics…
mkg Month % ch Year to date % ch. Major destinations Trends for season to date
Australia 22.1 +25% 179.0 +9% China, India, Czech Republic, Italy, Korea
China up; Czech Rep, Italy, India, & Korea down
NZ 10.0 -12% 66.2 -17% China, Italy, UK, India, Germany India & Germany up; China down by 37%, UK & Italy down
Uruguay 6.3 +46% 22.0 -14% China, Germ, Turkey, Italy, Bulgaria
Germany up; China down 48%, Turkey, Italy, & Bulgaria down
Argentina 3.0 -7% 23.7 +26% China, Germany, Czech Rep, Italy, Turkey
China, Germany, Czech Republic & Turkey up; Italy down
South Africa 3.8 +39% 25.9 +6% China, Czech Rep, Italy, India, Germany
China, Italy & Czech Rep up; Germany & India down
USA 0.445 +43% 1.865 +5% China, India Other destinations up; China & India down
Sources: ABS, Beef + Lamb NZ, SUL, FLA, Capewools, USDA Notes: Raw and semi-processed wool. Australia, New Zealand, Uruguay, Argentina and South Africa are for January and the Southern Hemisphere season from July to
January. The month for USA is for January and the year to date is the US wool season October to January 2017.
USc/lb clean
Month average
Last year % change Year average Last year % change
Australia 501 449 +11% 500 444 +13%
NZ 117 180 -35% 120 181 -34%
South Africa 503 444 +13% 498 447 +11%
UK 91 116 -21% 91 118 -23%
Sources: AWEX, NZ Wool Services International, Capewools, BWMB Notes: Prices are for February. Australia is the 21 MPG, South Africa is the 21 micron indicator, NZ is 25-32 micron average, UK
is the British Wool Marketing Board Indicator. Year is for the calendar year January to February.
UScents/lb Month average Last year % change Year average Last year % change
Cotton 85.3 66.3 +29% 83.9 67.6 +24%
Synthetics 82.2 72.1 +14% 80.1 72.9 +10%
Wool: cotton 5.87 6.78 -13% 5.96 6.56 -9%
Wool: synthetics 6.09 6.23 -2% 6.25 6.09 +3%
Sources: AWEX, Poimena Analysis, Cotton Outlook, PCI Fibres Notes: Prices are for February. Year is the calendar year to February. The wool:cotton and wool:synthetic ratios are based on 21 micron wool.
Wool Exports >>>
Wool Prices >>>
Fiber Prices and Ratios >>>
Page 3 key
Consumer Confidence High in US, the EU and Japan;
Improving in China; Weak in South Korea
Source: The US Conference Board, the European Commission and www.tradingeconomics.com
Data to February 2017
20
40
60
80
100
120
140
US
EU
Index
Jan 2008 = 100
60
70
80
90
100
110
120
130
140
China
Japan
South Korea
Index
Jan 2008 = 100
Price Differentials Rise for Superfine Merino Wool,
Drop for Broad Wool% relative to 21 micron wool
0%
10%
20%
30%
40%
Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17
18 micron
19 micron
% difference
Average since 2010
Source: AWEX,
Data to 3rd March 2017
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17
23 micron
28 micron
% difference
Average since 2010
Lamb prices in Australia and New Zealand (the world’s two major exporting
countries) have lifted in recent months while prices in the UK (a major producer
and consumer of lamb) have dropped sharply. While prices have been volatile in
these countries, prices in the US have been remarkably stable at high levels.
As the chart shows, lamb prices in the US have remained at around the same
level for the best part of the past three years. This remarkable stability has been
maintained even though prices in Australia and New Zealand (the two major
lamb meat exporting countries and the major suppliers to the US market) have
seen price volatility over the same period.
In the past 12 months, lamb prices in Australia has risen strongly, lifting by
around 30%. This rise has been fuelled by continued strong demand for lamb
within the Australian domestic market and from key export markets.
Furthermore, the number of sheep and lambs available for slaughter has fallen.
Wool and sheep producers in Australia are holding lambs and sheep back to
rebuild their flocks in response to the higher wool prices. A number of
slaughterhouses have closed recently due to the drop off in slaughter numbers.
Sheepmeat Market
Page 4
Trends, Drivers and Prospects
USc/lb Month average
Last year % change Year average Last year % change
Australia 220 172 +28% 211 170 +25%
NZ 168 145 +16% 168 145 +16%
UK 216 272 -21% 215 263 -18%
US 337 339 -0.4% 339 340 -0.3%
Sources: Meat & Livestock Australia, Beef and Lamb NZ, USDA, UK Agriculture and Horticulture Development Board Notes: Prices are for February (to January for New Zealand). Australia is trade lamb, New Zealand is all export lamb, UK is 12-25kg SQQ lamb, US
is 55-65 lb, choice and prime lamb. Year is calendar year and year average is year to February.
Lamb Prices >>>
Lamb Meat Exports >>>
Million lbs Month % ch Year to date
% ch. Major destinations Trends for calendar year to date
Australia 47.3 -3% 92.2 +5% US, Middle East, China, Hong Kong, the UK
Middle East, China, Hong Kong and the UK up; US, down
NZ N/A N/A N/A N/A N/A N/A
Sources: Australian Bureau of Statistics, Beef + Lamb NZ Notes: Month data is for February and the calendar year from January to February. Data not available for New Zealand
March 2017 >>>
Lamb prices in New Zealand have also risen, by 16%, in the past 12 months due to strong export demand and lower supplies. In contrast to this
improvement, lamb prices in the United Kingdom have fallen sharply in recent months. In US$ terms, UK lamb prices have dropped by 21% year-on-year.
Some of this decline is due to the sharp drop in the UK pound against all currencies following the Brexit vote in mid-2016. Even so, lamb prices in UK
pound are 9% below year earlier levels. There has been significant competition for lamb in the UK from other meats, which has pushed the prices down.
In the short-term, it seems likely that US lamb prices will be maintained, or even improve. The United States Department of Agriculture predicts that,
with lower US sheep numbers at the start of 2017, domestic production of lamb and mutton will decline again in 2016. Furthermore, cold storage stocks
of sheepmeat have dropped to half the levels seen just six months ago. Imports from Australia and NZ are also likely to be restrained. As a result,
available supplies will be low, helping sustain US lamb prices.
Lamb prices in UK drop, steady in the US and
rise in Australia and NZ
0
50
100
150
200
250
300
350
400
USA UK
USc/lb
Source: Meat & Livestock Australia, Beef & Lamb NZ, USDA, UK Agriculture and Horticulture Development Board
Notes: Trade lamb for Australia; all lamb export price for NZ; 55-65 lb, choice and prime lamb for US; Standard
Quality Quotation – 12-25 kg lamb
Data to February 2017 except for New Zealand which is to January 2016
0
50
100
150
200
250
300
350
400
Australia NZ
USc/lb